NASDAQ flags into Wednesday, FOMC minutes on deck, here is trading plan

NASDAQ futures are coming into Wednesday gap up after an overnight session featuring extreme range and volume. Price worked sideways overnight, briefly trading below the Tuesday low around 8pm New York before rotating back up to the Tuesday midpoint, then back down again. As we approach cash open, price is hovering a bit below Tuesday’s midpoint.

On the economic calendar today we have crude oil inventories at 10:30am, 30-year note auction at 1pm and FOMC meeting minutes at 2pm.

FOMC minutes are released on a three week lag. Investors will be keen on listening to how the Fed was thinking in early March, when covid-19 denial was still running high.

Also be aware that Fed Chairman Jerome Powell is set to speak tomorrow at 10am.

Also remember that tomorrow is the last trading day before the long weekend.

Yesterday we printed a normal variation down. The day began with a pro gap up that sellers drove down into shortly after opening bell. Buyers initially rejected a move back down into Monday’s range, spiking price higher, up through the midpoint but unable to take us range extension up. Instead price fell back down through the midpoint and made new lows twice in a choppy manner before a buying rotation worked back up to the midpoint. Then we flushed lower into the close, closing on the lows.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up through overnight high 8143 setting up a tag of 8200. Look for sellers up at 8222 and two way trade to ensue.

Hypo 2 stronger buyers trade up to 8300 before two way trade ensues.

Hypo 3 sellers press into the overnight inventory and close the gap down to 8013 then continue lower, down through overnight low 7953.25. Look for buyers down at 7915.25 and two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Tuesday pro gap up for a second consecutive day after an overnight session featuring extreme range and volume. Price was balanced overnight until about midnight, chopping along the upper half of Monday’s range. Then price drove higher, trading up through Monday’s high and exploring higher. As we approach cash open, price is hovering inside of the March 10th range.

On the economic calendar today we have a 10-year note auction at 1pm followed by consumer credit at 3pm.

Yesterday we printed a trend up. The day began with a pro gap up into the 3/31 range, and after a brief two way auction buyers stepped in and the trend up began. Price was trend up for the entire session, ramping into the close and ended near session high, ending with price in the 3/11 price range.

Heading into today my primary expectation is for buyers to gap-and-go higher, trading up through overnight high 8303.25 setting up a move to target 8400. Look for sellers up at 8478 and two way trade to ensue.

Hypo 2 sellers press into the overnight inventory, working down though overnight low 7948. Look for buyers down at 7910.75 and two way trade to ensue.

Hypo 3 stronger buyers trade up and close the gap at 8506.50 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into the week pro gap up after an overnight session featuring extreme range and volume. Price drove higher from Globex open (6pm eastern) until about 8pm, working up to the 7800 century mark which aligns with the lower quadrant of last Tuesday’s range. After a bit of flagging/consolidation a second leg higher took price up near last Tuesday’s midpoint before we settled into balance. As we approach cash open, price is hovering along the 7800 century mark.

On the economic calendar today we have 13- and 26-week T-bill auctions at 11:30am followed by a 3-year note auction at 1pm.

Last week began with a smaller up gap, then a buying campaign that ran higher through early Tuesday. From mid-Tuesday on sellers controlled the tape. Wednesday morning saw prices gap down to a new weekly low then Wednesday formed a wide range as most of the day was spent discovering lower prices. For most indices, the rest of the week was spent trading inside the Wednesday range, balancing. The Russell was slightly divergent to the downside. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a normal variation down. The day began with a gap down in range that buyers quickly resolved on the open. Said buyers took price a few ticks beyond the Thursday high but were unable to break balance. Instead responsive sellers worked price back down through value, rotating down near the range lows (but not exceeding them). Then late in the day a ramp took price back up to value. This action all took place after much worse-than-expected Nonfarm payroll data. This resilience of the tape to weak economic data told a story.

Heading into today my primary expectation is for sellers to work into the overnight inventory and tag the 7700 composite VPOC. Buyers show up here and work price up through overnight high 7870 setting up a run to 7908.50 before two way trade ensues.

Hypo 2 stronger sellers work down to 7600 before two way trade ensues.

Hypo 3 even stronger sellers work a full gap fill down to 7518.25. Look for buyers down at 7484.75 and two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

Being an oil speculator requires thinking like an oil man. Oil carries more geopolitical risk than any other speculative instrument on the planet. Mining oil requires medium intensity work, it takes up tons of space and oil is the fuel of war.

Which is why (aside from the devastating climate change underway) I’ve always held such disdain for this crude blend of plants and animal bones. But by golly I have a job and that is to extract as many fiat american dollars as possible from the global financial industrial complex. Whenever the number on the screen shows a certain threshold of fiat american dollars in my ledger, they are withdrawn and converted into real assets—land as far north and at as high an elevation as my constitution allows. Greenhouses. Irrigation. Cement and steel and bulk minerals.

It would have been borderline negligent to not acquire a few position in oil these last few weeks. When I write something like this, a bold stance that borders hyperbole, I’d better have some data behind it. Therefore I support my line of thinking with a 20-year chart of sector performance. Energy sector was a brutal laggard well before the Valentine’s Day covid-19 massacre. But once the whole herd started to panic, babies were being thrown out with the bath water. Look at this chart, then lets pick these thoughts back up below this pornographic beauty:

When it comes to investing, or any form of exchange with humans really, it is important to do your best to place yourself into the mind of whomever you’re dealing with. Oil investing is a space dominated by religious zealots and ideologists. Muslims and Christians. Barbaric kingdoms. This is not where democracy exists. Democracy gave us the Technology sector. Religion and war gave us the oil sector.

When it comes to war, you have to have some reverence for the Chinese. Their population is obedient, even under authoritarian conditions that would have every snowflake in America, from the gay motorcycle-riding-babied boomers to the woke hipsters revolting. Those Chinese cooperate. Need a pipeline built? You want obedient subjects. Want to deal with the Russians? You better come correct.

The Russians don’t play.

“trust, but verify” – Russian Proverb

If I am going to invest in oil, I want to position alongside the only people I consider ruthless and obedient enough to fend off the religious freaks. It also has to be emerging markets because since the days of British colonialism there have always been less qualms over exploiting natural resources in foreign lands. That is why PTR is my play.

But the americans are a bunch of gun nuts, cowboys capable of surprising even the most elaborate communist plan. That is why I also took position in WES. These two tickers practically trade inverse of each-other, until they eventually don’t. Until the oil shortages start, and believe me they will, especially if we are plunged into another (inevitable) conflict.

It’s all very bleak, I know. Let’s leave oil behind for now.

Okay last thing I’ll say. I am going to accumulate more PTR soon. Both WES and PTR will be held for several quarters, and I may keep PTR for the rest of my life.

—–

I have a disease. Unrelenting optimism. I am haunted with an endless stream of positivity that seeps into everything, including my perception of the stock market. I am still bullish.

I am working with an interesting combination of system signals into the first full week of Q2. Basically I expect sellers to re-engage early in the week, pressing right into the FOMC minutes Wednesday afternoon. Then I expect the auction to reverse and rally into Good Friday. The way the sun shines come easter will awaken the resting optimist in others, triggering a rally that lasts the better part of Q2.

That is really how I feel.

So my plan is the same as it has been since I returned from the mountains at the end of February—accumulate more shares in our immutable institutions: Microsoft, Alphabet, Tesla, Costco, Walmart. One other change I need to make is swapping out my Goldman Sachs shares for Square. If I am going to lose @Jack to some vulture douche bag at Twitter, I need to retain some @Jack exposure via Square. Plus that new Goldman CEO buying pj’s right now is just in bad taste.

—

bearish to start the week, then bullish until otherwise noted,

Raul Santos, April 5th 2020

Exodus members, the 280 edition of Strategy Session is live. Go read the ‘why’ behind my forecast.

NASDAQ futures are coming into Friday with a slight gap down after an overnight session featuring extreme range on elevated volume. Price was balanced overnight, chopping along the upper half of Thursday’s range. Several times price came close to taking out the Thursday high but didn’t exceed it. This formed a weak high heading into nonfarm payroll data. At 8:30am NFP data came out well below expectations:

USA Nonfarm Payrolls for Mar (701K) vs (100K) Est; Prior 273K

USA Unemployment Rate for Mar 4.4% vs 3.8 Est; Prior 3.5%

Since then price has been stable, despite the soft data. As we approach cash open, price is hovering above Thursday’s midpoint.

Also on the economic calendar today we have ISM non-manufacturing data at 10am.

Yesterday we printed a normal variation up. The day began with a flat but only because futures were moving fast ahead of the bell. A few minutes prior to the open we were gap up by about 50 handles. Sellers worked this gap fill before the open and once opening bell hit we saw a buying drive higher. Sellers stepped in ahead of Wednesday’s midpoitn and reversed the open drive up but said sellers could not take out overnight low. Instead price ripped higher again, making new higher of day and then holding a tight flag through New York lunch. Sellers were active again in the afternoon but their efforts were again thwarted. Another rip took price near the overnight high by end of day, and we closed near the highs, but never actually fulfilled the overnight stat.

Heading into today my primary expectation is for buyers to work into the overnight inventory and close the gap up to 7629.50. From here we continue higher, up through overnight high 7651.50 on our way to tagging the composite VPOC at 7700 before two way trade ensues.

Hypo 2 stronger buyers rally price up through 7700 and tag 7743 before two way trade ensues.

Hypo 3 sellers press down through overnight low 7509.50 setting up a move down to 7359 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Thursday gap up a quick +100 after an overnight session featuring extreme range and volume. Price slowly pressed higher overnight, working back to the Wednesday midpoint and then exceeding it as we came into balance. At 8:30am Initial/Continuing jobless claims data came out twice as bad as expected. As we approach cash open, price is churning along the Wednesday midpoint.

Also on the economic calendar today we have durable goods orders at 10am followed by 4- and 8-week T-bill auctions at 11:30am.

Yesterday we printed a double distribution trend down. The day began with a gap down near a new weekly low. Buyers were first to act after the open, nearly working back up to the composite VPOC at 7700 before sellers stepped in and reversed the auction. The rest of the day was spent working lower. Maybe the day type could be classified as neutral extreme down, but given the range covered and overall structure of the profile, it more resembles a double distribution down. The day ended down near last Wednesday’s low.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 7437.50. From here we continue lower, down through overnight low 7433.75. Look for buyers down at 7357.50 and two way trade to ensue.

Hypo 2 stronger sellers trade down to 7216.75 before two way trade ensues.

Hypo 3 buyers work up through overnight high 7596.50 and tag 7612.75 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Wednesday pro gap down after an overnight session featuring extreme range and volume. Price worked lower overnight, taking out the Tuesday low early on and sustained a tight balance until about midnight when a fresh wave of selling worked price down to a new low on the week. Since them we have been in balance, and as we approach cash open price is hovering right along last Thursday’s low.

On the economic calendar today we have ISM employment/manufacturing along with construction spending at 10am then crude oil inventories at 10:30am.

Yesterday we printed a neutral extreme down, barely. The day began with a gap down in range and after an open two-way auction buyers stepped in and drove price higher. I say barely neutral extreme because just after the initial balance was set (just after 10:30am New York) price went a few handles higher, pushing range extension up and exceeding the prior swing high set on Friday the 13th by a bit. Then sellers stepped in, failed auction style. Sellers slashed down through the daily midpoint by late in the lunch hour and then defended a check back to the mid, eventually setting up a second leg lower, to a new low of day, neutral. We ended the day on the lows.

Neutral extreme down.

Heading into today my primary expectation is for buyers work into the overnight inventory and trade up to the 7700 composite VPOC. We chop here for a while before continuing higher, up through overnight high 7790.25. Look for sellers at 7813 and two way trade to ensue.

Hypo 2 sellers to gap-and-go lower, trading down through overnight low 7524. Look for buyers just below at 7512.50 (down as low as 7500) and two way trade to ensue.

Hypo 3 stronger sellers close the gap down at 7463.25 before two way trade ensues.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into Tuesday gap down after an overnight session featuring extreme range and volume. Price was balanced for most of the overnight session, balancing along the high print set Monday. Price nearly took out the Friday the 13th high print before falling back down into balance, and as we approach cash open, price is hovering just above the Tuesday midpoint.

On the economic calendar today we have Chicago purchasing manager at 9:45am followed by consumer confidence at 10am.

Yesterday we printed a double distribution trend up. The day began with a gap up in range, with price opening just above last Friday’s VPOC. After a tight two-way auction price began working higher, trading up beyond the Friday high before lunchtime. The better part of the afternoon was spent chopping up above last Friday’s high, with buyers actively rejecting several attempts back down into the Friday range. This eventually resolved as a grind higher into closing bell, taking us up near last week’s high (but not exceeding it).

Heading into today my primary expectation is for us to balance out. Look for sellers to press into the opening bell, trading down through overnight low 7764.25. Look for buyers down in the 7700 range, down to 7669.25 and two way trade to ensue, chopping between 7700 and 7900.

Hypo 2 buyers work into the overnight inventory and close the gap up to 7856. Buyers then continue higher, up through overnight high 7957 setting up a run to 8000 before two way trade ensues.

Hypo 3 stronger sellers close the gap left behind last Friday down at 7572.25. Look for buyers down at 7512.50 and two way trade to ensue.

Levels:

Volume profiles, gaps and measured moves:

NASDAQ futures are coming into the week gap up after an overnight session featuring extreme range and volume. Price began the Globex session gap down by about -150 handles. Since then price worked higher, trading up to the Friday midpoint before coming into balance. As we approach cash open, price is hovering just below the Friday midpoint.

On the economic calendar today we have pending home sales at 10am followed by 13- and 26-week T-bill auctions at 11:30am.

Last week the broad market bounced after nearly a month of discovering lower prices. Monday began with choppy weakness. Tuesday was gap up and buyers were in control through Thursday. Friday was choppy and two way before a sharp move lower took us into the weekend. The last week performance of each major index is shown below:

On Friday the NASDAQ printed a neutral extreme down. The day began with a gap down into the lower quad of Thursday’s range. After a tight chop for most of the day buyers stepped in and worked higher but were unable to close the overnight gap before that selling spike hit late in the day. We ended at low of day, in a neutral print.

Neutral extreme down. Inside day.

Heading into today my primary expectation is for sellers to work into the overnight inventory and close the gap down to 7572.25. Buyers show up ahead of 7500 and two way trade ensues.

Hypo 2 stronger sellers trade down through overnight low 7365. Buyers show up just below, around 7360 and two way trade ensues.

Hypo 3 buyers gap-and-go higher, trading up through overnight high 7690, tagging 7700 on the way to 7738.75 before two way trade ensues.

Levels:

Volume profiles, gaps, and measured moves:

Spring vibes are in full effect up here in the murder mitten today, with birds chirping and an electric green hue taking hold on the ground and trees. Otherwise the local scene is rather grimy.

We have a governor mandated shelter-in-place, which quite honestly has only modestly changed my professional and personal routines. The hustle has always been a remote endeavor for humble Raul. Last week I traded well up until Friday afternoon, when I stuck around later than I normally do and gave back my morning gains. Normally, on a nice Friday in spring, I’d take my morning gains and head down into the city to cavort with the day drinkers, saving me money and allowing me to spread my brand of propaganda locally.

These skype chat happy hours and zoom meetings might need to replace my old routines.

This virus changes everything. I doubt I’ll ever go to a rave or unsanctioned after hours event again without wearing safety glasses and a mask. The human condition is worsening, pestilent and viral.

After preparing the Sunday research and publishing the Exodus Strategy Session, I have mixed signals. There is plenty of reason we could see continuation to the upside, but then Utilities led the charge last week and IndexModel is flagging Rose Colored Sunglasses.  Therefore I am only allowed to short sell the NASDAQ all week. I will be doing so on a limited basis. Ideally an up gap inside the prior day’s range for me to fade. I will not be pressing trades late into the day unless we really accelerate to the downside again.

That’s about it. I am looking to buy more Microsoft and Google and swap out my Goldman position for Square. Ideally I buy into big down days, when things appear their worst. But who knows, I may have to chase the great ones.

My oil positions don’t feel good, WES and PTR, but I never expected them to. I shall stick with them for quite a while.

On Wednesday morning my quant strategy rebalances, hopefully I have time to share my latest thoughts on that project here.

That’s all for now. Trade’em well.

Raul Santos, March 29th, 2020

Exodus members, the 279th edition of Strategy Session is live, go check it out.